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Small businesses are engine of America

By Staff | Aug 13, 2010

This past weekend there was an article in The Journal about Craftworks at Cool Spring regarding its classes focusing on the “artist as an entrepreneur.” This article resonated with me as it combined two passions of mine the arts and economics.

At the risk of becoming too personal or anecdotal, I have spent a great deal of my life involved in the arts. As I am sure I have mentioned before in this space, I have a degree in English literature. My focus was literary criticism and in particular, the literature of the theater and modern drama. My late father made his living as a songwriter. My mother is a painter whose works have been displayed in the local community museum where she lives in Ohio.

I am a musician. I play keyboards for the Rolling Coyotes a local group whose music centers on local singer/songwriter Steve Warner. Incidentally, Steve Warner teaches songwriting on occasion at Craftworks at Cool Spring.

In The Journal article, David Lillard of Craftworks is quoted as saying that “good artists are not necessarily good business people.” He goes on to say that artists and artisans, especially those who want to sell their work on the retail market, are small business people and they have to be able to manage a business. Mr. Lillard further points out that the regulatory climate makes it very difficult for entrepreneurial artists to get started. I couldn’t agree more.

The regulatory climate needs an overhaul, but there’s additional hardship contained in the tax code. In West Virginia, artists and artisans, like all business people in our state, have the deck stacked against them due to onerous and ill-advised taxes.

I have a friend who is an artist and artisan. She designs and manufactures jewelry and other works of art and sells them on consignment through retail stores in the Eastern Panhandle. The way consignment works, if the item doesn’t sell, you don’t get paid.

For anyone who has ever been in business, you know that unsold inventory is a real problem. Many businesses finance their inventory through factoring arrangements. As the inventory ages, the burden on the business becomes more onerous to the point that it must eventually be “liquidated,” sometimes at a loss. For the artist/artisan as entrepreneur, that inventory nearly always is self-financed.

To add insult to injury, my friend went on to tell me that she recently received a tax bill on her unsold inventory. The state of West Virginia has a tax on business property, machinery and inventory. This is a tax that must be paid on the assets of the business whether or not there is any revenue. For an artist who is struggling to sell her work, to have to pay tax on the equipment used to create the work or on the unsold inventory is to my mind wrongheaded.

It is not always easy to sell artwork. In general it is a tremendous disincentive for businesses to operate in our state when taxes must be paid even if there is no revenue let alone profits. This is a tax on capital, and capital goes to where it is treated best and historically that has been “somewhere other than West Virginia.” Perhaps West Virginia tax law should be included in the curriculum for all aspiring entrepreneurs artistic or otherwise.

In a recent candidate forum, I cited the Tax Modernization Project in its assessment regarding West Virginia’s tax on business property, machinery and inventory. This group was formed by the governor in 2005 in order to study and make recommendations regarding our state tax structure. According to the Tax Modernization Project, this particular tax is our biggest obstacle to job creation. My opponent disagreed with me on this point and said so at the candidate forum.

However, he is not disagreeing with me per se; he is disagreeing with the experts who are appointed by the governor. The general consensus is that this tax has the effect of dampening the entrepreneurial spirit and is a “job killer.”

I commend Craftworks for its efforts to help entrepreneurs become more business literate. Artists and artisans deserve a chance to be able to make a living at what they love. As someone who was not able to achieve that kind of success, my heart is with them. We need to reform the tax structure of West Virginia so that entrepreneurs in all walks of life have a fighting chance to succeed. If they succeed, we all succeed.

Small entrepreneurial businesses stimulate economic activity (and often intellectual and artistic activity) and are the job creation engine of America. We need more of that in West Virginia.